US stock markets plunged, but just avoided the gloomiest predictions, as central banks around the world slashed interest rates in a bid to stave off financial panic.

The benchmark Dow Jones stock index lost more than 7% of its value, its largest one-day points fall in history, as Wall Street returned to work for the first time since last Tuesday's attacks.

Stock markets, Monday close

Dow Jonesdown 7.1%

Nasdaq down 6.8%

Frankfurt: Dax up 2.9%

London: FTSE 100 up 2%

Paris: Cac 40 up 2.7%

Tokyo: Nikkei 225, down 5%

The falls came after heavy losses on international markets over the last few days, and reflect unease over US economic prospects, and the impact of the attacks on certain key industrial sectors.

But some support came from a series of concerted interest-rate cuts around the world, with hefty half-point reductions from US Federal Reserve, the European Central Bank and the central banks of Switzerland, Canada and Sweden.

The interest-rate cuts were not only sooner and larger than many had expected, but were unusual in being timed on the same day - a departure from the usual central bank schedule.

No patriotic rally

Some had predicted - and politicians had urged - that investors would stage a patriotic rally on the first day of trading.

US Treasury Secretary Paul O'Neill, who attended the re-opening of the New York Stock Exchange, said he expected investors to "act like Americans" - a call not to engage in panic selling.

But fears over possible military retaliation, as well as the gloomy economic prospects for the US economy, kept shares firmly down.

The 7% fall in the Dow Jones was smaller than that seen in the 1987 market crash - but on a points basis, the 684-point plunge was the Dow's most severe in history.

Some sectors performed especially poorly, especially airlines, which saw their shares lose as much as half their value.

Financial companies, which face huge liabilities for their insurance arms, and in some cases enormous clear-up costs at their Manhattan operations, also took a battering.

Media, entertainment and technology shares were also conspicuously weak performers, as they were seen as especially vulnerable to the predicted plunge in US consumer spending.

Better than expected

But the mood was not entirely bleak.

Analysts pointed out that the New York falls were merely an attempt to catch up with heavy losses on global markets since Tuesday, and were considerable less drastic than the 10% plunge forecast by some.

One indication of the somewhat hopeful sentiment was the fact that European markets all finished in positive territory, with London, Frankfurt and Paris all registering 2-3% gains as Wall Street fell.

An unexpectedly heavy loss in New York would have provoked further falls in Europe.

Central banks rally round

Central bank intervention, which was pushed through more aggressively than predicted, also provided some support.

It is rare for central banks to cut interest rates by half a percentage point - the smaller change of a quarter-point is usually preferred.

It is even more rare for central banks to act in concert to calm markets.

The rate cuts follow other concerted moves last week to pump cash into the banking system; last week, the US, Canadian and European central banks provided $208bn in short-term financing in order to ensure that banks do not run out of money.

Financial policy-makers did their best to lighten market sentiment.

Mr O'Neill said that the share-price falls were predictable, and did not reflect any underlying weakness in the US economy.

In a statement after the rate cut, the Fed said it would "continue to supply unusually large volumes of liquidity to the financial markets ... until more normal market functioning is restored".

And in an attempt to improve sentiment further, it predicted that the "long-term prospects for [US] productivity growth and the economy remain favourable".

Back to work

Workers at Wall Street offices had turned up early to work, testing telecoms and computer systems patched and replaced since last week's atrocity.

With Wall Street subway station closed, and streets still shut to traffic, brokers and analysts negotiated their way to work over temporary electricity cables and past stand-by generators.

The atmosphere at the launch of trading was sombre, with market participants observing two minutes' silence.